The manager of a pair of bond-financed Indiana healthcare centers sued by UMB Bank NA for mismanagement accused the bond trustee of exaggerating the facilities' problems and warned receivership would sink the $117 million of bonds issued to finance the project.
UMB's lawsuit and its motion for for immediate appointment of a receiver is an effort to "disenfranchise" the manager's CEO, who is a top bondholder, said the
"If successful in its motion, the trustee will harm not only patients, but also likely completely devalue all the bondholders' investments," Crossroads warned.
Crossroads is one of three related companies that
Unlike Crossroads, the PFA supports receivership.
Crossroads CEO, Moshe Orlinsky, owns more than 20% of the senior bonds and an interest in the subordinate bonds issued for the project, court documents said.
"It should be noted from the outset that for all of the trustee's mudslinging at Moshe Orlinsky, Crossroads' CEO, the trustee does not address the fact that Mr. Orlinsky holds tens of millions of dollars of the bonds and as a consequence, is one of the largest bondholders for whom the trustee purports to act," the filing said.
Issued less than four years ago, the debt includes $85.6 million of senior tax-exempt bonds and $32.3 million of subordinate bonds. PFA used most of the bond proceeds to acquire the facilities from then-manager Crossroads as
"Since the closing of the issuance of the bonds, the trustee and its counsel have deliberately excluded Mr. Orlinsky from any discussions or meetings with the trustee, its counsel, and the other bondholders concerning the facilities, notwithstanding Mr. Orlinsky's direct requests to be included," the court filing said in a footnote.
"Indeed, Mr. Orlinsky's efforts to access his information and participation rights as a 21.5% bondholder have been purposefully ignored and blocked by the trustee and its counsel, and Mr. Orlinsky reserves all claims and rights associated with these improper actions to disenfranchise him."
Orlinsky owns 21.5% of the senior bonds and holds an interest in the entity that owns 100% of the outstanding subordinate bonds, court filings show.
"Mr. Orlinsky has no desire to see the facilities fail and his investment evaporate," the brief said.
The bonds have not traded since they were issued at par in July 2023, according to the Municipal Securities Rulemaking Board's Electronic Municipal Market Access website. The senior debt matures through 2058 and features coupons ranging from 7% in 2033 to 8.125% in 2058.
In
The centers apparently do not generate enough cash to fund operations without contributions from the manager, UMB said, a situation that endangers not only the bondholders but the "vulnerable patients who rely on their continued operation for care and safety." It also accused Crossroads of unorthodox financial management practices.
Crossroads called the claims "wholly without merit and disingenuous, at best." Receivership "is without legal basis, extreme and unnecessary," the filing said.
The manager blamed revenue problems on delays in obtaining permits and Medicaid approvals, and in collecting on receivables from private insurers.
Orlinsky denied the company intentionally delayed billing for services so that patients would first exhaust their insurance deductibles before claims were submitted, as UMB alleged. The company put in $3.6 million of its own funds, deferred taking management fees and provided $6 million in letters of credit, the filing said.
"The receivership sought by the trustee in its motion is, in fact, a thinly veiled attempt to strong arm Crossroads into making further financial concessions and contributions to the facilities that it has no obligation to make, or to cut Crossroads out of the project and avoid repayment of over $10 million in funds contributed by Crossroads," the management company said.
The PFA, which owns the facilities, has sided with UMB, saying in an April filing that it appears the situation under Crossroads has "deteriorated dramatically" since the bonds were issued.
"At the risk of being simplistic, the facts alleged in the receiver motion paint a very serious picture about — among other things — the financial viability of [the facilities] which, in turn, raises serious questions about whether the facilities can generate sufficient revenues to ultimately repay the bonds," the PFA said.
A hearing is set for May 21 on the appointment of a receiver.
